LONDON: The price of gold rose on Thursday on the U.S. economy getting further monetary support from the Federal Reserve but gains were kept in check as holdings in the top bullion-backed fund fell the most in three weeks to a five-year low.
Minutes of the Federal Reserve's late April meeting released on Wednesday had reassured investors that Fed policymakers will continue to support the economy.
The minutes showed policymakers discussed exit strategies from its ultra-loose monetary policy. But they also made clear that the Fed was not signalling that it was ready yet to 'normalise' policy or raise interest rates any time soon.
Increased central bank liquidity and a low interest rate environment has been an important factor helping gold's gains in previous years.
Spot gold edged up 0.3 percent to $1,295.30 an ounce by 1017 GMT, after closing between $1,291 and $1,296 for the past five trading sessions. U.S. gold futures rose 0.6 percent to $1,295.90 an ounce.
Investors were also eyeing U.S. data to be released later in the day and the European Union parliamentary election for a break from the narrow trading band over the last few sessions, with prices unable to close above $1,300 or below $1,290 an ounce.
"The trading range for the month so far in percentage terms is the narrowest for at least 10 years because of lack of investor interest," Saxo Bank head of commodity strategy Ole Hansen said.
"Obviously we have the European elections and if we have some euro weakness on Monday that could potentially take us down through support at $1,280."
The first polls for the EU's parliament since the bloc's debt crisis blew up open on Thursday, and an expected rise in support for eurosceptic parties threatens to destabilise some governments or sway them to delay any painful economic reforms.
FUND OUTFLOWS
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 3.3 tonnes to 776.89 tonnes on Wednesday - the lowest since December 2008.
The outflows are the biggest since April 30.
The fund is considered a good measure of investor sentiment and could influence prices due to the size of its holdings.
In the physical markets, India's central bank eased tough gold import rules on Wednesday by allowing seven more private agencies to ship the metal, a move that industry officials say could increase supplies and reduce premiums in the peak wedding season.
India is the second biggest gold buyer after China.
Among other precious metals, platinum added to gains on supply fears as strikes in major producer South Africa dragged on for a 17th week. It rose 0.8 percent to $1,476.40 an ounce, below a two-month high of $1,483.50 hit last week.
Palladium rose 0.3 percent to $828.65 an ounce after climbing to a 2-1/2-year high in the previous session.
Spot silver rose 0.7 percent to $19.50 an ounce.
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